What is a reverse mortgage?
A reverse mortgage could more aptly be called a deferred payment mortgage. It's still a mortgage, like a regular forward mortgage, except the payments never come out of your pocket. Instead, they accrue against the equity in your home as long as you have that mortgage.
How long will you have it? That depends upon your circumstances and wishes. Generally, it ends when either you pass away, or it's no longer viable for you to live in the home, or for any reason, you decide to sell your home. That is when it is settled up either with you or your heirs.
More technically, it’s a financial agreement in which a homeowner trades some of the equity in their home in exchange for regular payments, a lump sum, or a combination of the above. It is still your home. Your name is on the deed. The bank does not own your home! It is tailored to your specific needs and wishes. And it’s easier to qualify for than other types of financing.
Some say that you will never have a house payment again with a reverse mortgage.
True and false: You will still need to pay the taxes, insurance, and any HOA dues.
In some cases, even those can be worked into the reverse mortgage loan so that they are not out-of-pocket expenses. That is a little trick that not everyone knows about, so it pays to ask. There will never be a payment towards principal or interest out of your pocket. In fact, this is true even if the value of your home goes down: even if it crashes. You or your heirs can never owe more on the house than it is worth. You can stay in the home even if you are upside down on it, as long as you keep up the taxes, insurance, and repairs.
The keys to getting a reverse mortgage are having enough equity for the numbers to work. And, generally, being at least 62 years old, although a limited number of programs start at 55. Just a note on equity. Florida real estate values have climbed steeply in the last few years, making reverse mortgages worth a look. If you did not qualify for a reverse mortgage in the past, the numbers might work out more favorably now.
Who is a Reverse Morgage right for?
For those who want to age in place, a reverse mortgage can free up cash.
For those who are house rich and cash poor, it’s a way to tap into an otherwise unused asset to enjoy your senior years.
For those who have cash but are savvy and want even more cash flow for insurance strategies and financial planning.
For those who want an insurance policy against living to a very old age and outliving their money, providing this home is the right home to age in place in.
Who is it wrong for?
Those who do not intend to stay in the home for the next five years may generally not be a right fit, but in some cases, it may still be right.
Those for whom a reverse mortgage will not be a solution in the long run as they still will not have enough money for living expenses.
Those for whom the family homestead is no longer suitable for their needs might want to sell and buy something closer to the kids, smaller, all on one floor, etc.
Those who want to leave a paid-in-full home to their heirs may not want to get a reverse mortgage.
A good approach is to talk to a professional. One that has a lot of time, preferably one who will talk to both the senior and the heirs as applicable, and one who can meet in person. There is a lot to know about a reverse mortgage, and the first thing is to discover if it's right for you or the Seniors in your life.
Some other appealing features of reverse mortgages deserve separate blog posts to describe, so look for them in future articles.
The term “hard money” comes from metal coinage (rather than paper) but has come to mean a tangible asset.
But what is a hard money loan (sometimes called a private loan)? Most often, it's money borrowed from a private individual or pool of individuals. The borrower’s real property (tangible asset) secures that loan.
A hard money loan is almost always on an investment property for commercial purposes only. Some ask if a residential property is eligible for a hard money loan? Yes, if it's factually your investment and not used for personal reasons. You will need to state what the purpose of the loan is.
Many folks think of a hard money loan as something you only do if you are desperate for funds right now. However, this is not really the case. A hard money loan can be advantageous, but what determines that?
Sometimes it helps you avoid having to have a partner in a deal. Yes, your rate is higher, but you saved by not resorting to a business arrangement you preferred not to have. Sometimes you need a very fast loan to nail down property, and the seller knows your private loan is as good as cash.
There are different types of hard money loans.
The commonly known type of hard money loan source is mortgage brokers. Sometimes a mortgage broker lends their own money, or the broker maintains a pool of contacts, several local investors, to run your deal by. With this sort of loan, the investor will often meet with you, look you in the eye, and see if they want to invest. The deal just has to make sense to them, and they want a good feel for your project.
Another type is with an institution equivalent to a bank that mortgage brokers who do hard money (private) loans have access to. Such institutions will have set guidelines their loans must follow. Usually, a person has to put down a substantial amount of money to acquire this type of loan. Such as 30%. However, there are programs specifically meant for fix and flippers, with a higher percentage loaned on the property for those in that industry who have had successful projects.
Hard money loans are often two to three-year terms, although sometimes you can negotiate a shorter-term with a slightly higher interest rate. With private investors, supply and demand are factors. How they assess your project can also be a factor.
The plus of these loans is that they can be very fast. You need to have an exit strategy since hard money loans are meant to be a shorter-term solution.
When does it make sense? If it’s a property that you can’t get a traditional loan on because it needs a new roof, but you are a contractor, and you’ve done the math, indicating there is good profit if you can nail this property down, fast. But, finally, the answer is when it makes sense for you.
In part one of comparing loan estimates from different lenders, we covered quite a bit of data. If you didn't read that post - check it out here.
When comparing loan estimates from different lenders make sure you're comparing the same
There's lots of information on a loan estimate, so make sure you're comparing the same items above. For example, you don't want to compare a
15-year conventional loan to a 30 year FHA loan.
Next, it's also essential to get your loan estimates on the same day. That's because interest rates change every day - and sometimes more than once during the day.
So if you get a loan estimate on Monday from one lender and wait until Friday to get the second estimate, you're not comparing apples to apples.
A loan estimate isn't an email from a loan originator saying something like:
"Hi John, we can get you a rate of 3% for 30 years. Let me know when you're ready to proceed."
That is not an estimate - it's a sales pitch.
So, if you’re comparing lenders here are the only fees to compare:
There might be some other fees from the lender like - "processing fees" so look for those.
There are fees on every estimate that the lender doesn't have any control over. These are:
Title Fees - these fees come from the title company the seller's real estate agent chose. The lender has no control over these fees.
Property Taxes - these fees come from the county and will be the same no matter what lender you use.
Homeowners insurance - you can shop for insurance.
Communication is an essential part of your mortgage.
That's right. You need excellent communication skills from the loan officer so that they hear what your objectives are and steer you to the right product for you.
As an example, do you really need a 30 year fixed if you are moving in 5-7 years?
Don’t just ask for a LE, ask for advice on what is best.For instance, there are lenders that the broker can take you to where if you buy down the rate it might be very affordable.
It's challenging to get the same exact scenario priced from one lender to another, but make sure you trust the loan officer. Check reviews.
We hope this information about Loan Estimates was helpful.
As always, the team at Clearwater Mortgage is here to help you. Call us today at 727-259-2900.
If you’re relocating to Clearwater, FL, or planning to buy a new home, you may be wondering if you should purchase a condominium or a house. This choice has a lot to do with your lifestyle and what’s important to you. Depending on the location, condos can be less expensive. But not always. Condos are definitely easier to maintain, which can be a considerable advantage if you’re a snowbird. Let’s look at some of the other differences:
In most cases, a house will keep its value better than a condo. That is unless you’re talking beachfront property. Even though houses cost more upfront, they can be a better investment for these two reasons:
Depending upon the location and neighborhood, in the Tampa Bay area, it’s generally easier to sell a house. It's because they’re in higher demand than condominiums and townhomes.
Growing families want a house with a yard for their kids and pets. At Clearwater Mortgage about 20% of our borrowers are purchasing a condo. That's compared to the other 80% going for the house, picket fence, and room to grow!
Lenders love stand-alone houses. This is because the homeowner has more control of the property and so would the lender. In most cases, there aren't any association rules. Plus, the borrower owns the home and the land. Whereas with a condo, the owner only owns the inside walls.
There are more choices for mortgages. For example conventional, FHA, VA loans are all available for houses. Whereas FHA seldom lends on a condo unless it’s on an approved condo list. And the approved list in Pinellas County is short!
Interest rates can be lower. But of course, this depends on quite a few things. For example credit history, cash down, and age and condition of the property. If you’re comparing your options, give Clearwater Mortgage a call at 727-259-2900. We’ll be happy to run the numbers for you.
No more mowing the lawn or replacing siding, windows, and roofs. Lower maintenance is a huge advantage especially if you’re a snowbird. Many of our borrowers come from New Jersey, Canada, Michigan, and Ohio. Like most retirees, they just want to have fun in the sun, and that doesn’t include a lot of chores.
But, even though there’s less to do around the house, you still may have added fees for upkeep. So if you’re considering a condo, it’s important to make sure it’s in excellent condition before you take the leap. You don’t want to buy and then find out you have to help pay for a new roof or an expensive swimming pool upgrade.
Picture yourself surrounded by neighbors – close by, in fact just on the other side of the wall. If this gives you the shivers, a house is a much better choice. But, if you enjoy having lots of friends and activities, consider a condo. The condo associations in Tampa Bay are among the best in the US for creating a sense of community.
One good way to make a decision is to visit the complexes and communities you’re considering. Make sure you stop by during different times and days. The same thing goes for neighborhoods – it’s essential to make sure you’ll be happy where ever you buy. So, get to know your neighbors first.
Even with single-family dwellings, you can have association fees. If you’re interested in a property, ask your realtor if there are any association fees.
If you’re getting ready to shop for a home, you’ve probably heard that you need to get “pre-qualified” by your mortgage broker. And, you might be wondering – Why and How? Well, read on, and we’ll tell you everything you need to know.
Reason #2: You need to know how much you can really afford to buy. Nothing is worse than falling in love with a $400,000 home only to find out you really can only qualify for $350,000.
It’s vital that you know, like, and trust who you’re working with. Also, if you’re a new homebuyer, it’s super helpful if your loan officer explains the home loan process in easy to understand English instead of “mortgage speak.”
With Clearwater Mortgage, you can fill out an application online, call us, or come into our office and meet us. No matter how you do it, you’ll be asked questions about your income, assets, and debts. You’ll also have your credit pulled.
If possible, it’s good to set aside a little time (30 to 45 minutes), so you can answer all the questions thoroughly.
Here are the basics of what you’ll need if you have a job.
If you’re self-employed, you’ll need to provide a bit more.
The faster you get this data together, the quicker you’ll get your letter.
For example, if you change jobs, take out a new credit card, buy a new car – all of these things can mess up your pre-qualification.
A good rule is when you’re shopping for a house, don’t make any job changes or take out any credit before you ask your loan officer.
At Clearwater Mortgage, we push to get our clients pre-qualified fast! Once we have the items above, we can usually get the letter out the same day or the next day at the latest. Also, we know that often borrowers are shopping on the weekends so, we’re ready to help during off hours to get new shoppers pre-qualified quickly. Call us today at 727-259-2900.
Most of us are familiar with different types of mortgages for purchasing or refinancing real estate. Whether you're buying a house, condominium, or commercial property to fix and flip or rent out–you know there are fixed rates loans for 15 and 30 years as well as loans with variable rates. You're probably also familiar with conventional, VA, and FHA loans. But, what is a Hard Money Loan (sometimes called a Private Loan)? Read on to find out more.
It's not money borrowed from a bank or a big institution. It's money borrowed from a private individual or individuals. You've probably borrowed money from friends or relatives. That's a loose example of a private loan. But in that case, it probably wasn't "secured" with anything other than your promise to pay it back.
When a Private Money investor or lender loans out their money, it’s not surprising that the fees and rates charged are higher than what you'd receive from a credit union or bank.
There are several reasons. For example, if your past credit history isn't that great. Maybe you've had a short sale, bankruptcy, or foreclosure. No lending institution, bank, or credit union will loan to someone with a recent bankruptcy. But Private Money lenders will.
Another big reason investors and house-flippers love Private Money Loans is that they may have a property that a bank won't lend on. The property isn't in good enough shape and up to the bank's standards. Maybe it needs some major rehab work done before the bank would even consider lending on it.
If you need your funds in a hurry, don't count on a bank, you'll only wind up frustrated. One significant advantage of Private Money lenders is that they can move fast. You'll get the cash you need generally much quicker than going through a big institution.
One thing to know about Hard Money loans is they are based almost solely on equity. That means you'll have to have some skin in the game to play. Generally speaking, you'll need to have at least 35% equity in the property (if you're refinancing). If you’re purchasing a property, plan on having 35% to 40% to put down of your own money. And that's your own money - not from another lender. Here are some examples:
Office Building - You've found a great deal on an office building in Pinellas County. The price is $400,000. You would need to have a minimum of $140,000 to put down yourself to borrow the remaining $260,000.
Single Family Home - There's a super good deal on a house in Clearwater, but it needs work so the bank won't lend on it. They're asking $200,000. Be prepared to put down at least $70,000 and finance the other $130,000.
If you need a loan on a home you're planning on living in, Hard Money might not work – you’d need to call us so we can get more information. You may need to go through a bank. Hard money is mainly for investment property like rentals, or a home you're going to fix up and immediately flip, or a commercial property like a restaurant or office building.
We all know that property in Tampa Bay is hot, and if you happen to find a good deal–you have to move fast. Here's an example: You see a house that's $250,000 and a super good deal. You have almost all the cash you need - you're just short $100,000. The problem is, even though you have $150,000 to put down, no bank will give you a loan because of your credit. But a Private Money lender will, and it will probably be done pretty darn fast.
Are you a contractor who's found your dream dumpy home? Congratulations! But don't expect to get money from a bank until it's in great shape. With Hard Money, as long as you have at least 30% to put down, you have a good chance of getting enough to fix up the dump and sell it for a nice profit or rent it out for monthly cash flow.
Clearwater Mortgage is a Florida Broker (Company NMLS# 921372) with over 20 years of experience in lending.
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If you’ve been thinking about refinancing, but aren’t quite sure if it’s a good idea, read on for some quick tips.
First of all, there are two types of refinance loans:
Refinancing is a good idea under some circumstances. Here are a few:
Interest rates are better than what you have, and you plan to stay in your home for a while. If you think you may be moving within the next few years, refinancing might not be worth it because there are fees connected to any loan.
At Clearwater Mortgage, we strive to do what is best for the borrower. If refinancing is a good idea, we’ll let you know. If not – we’ll tell you that too. But, no matter what–we’re always happy to hear from our past clients.
Give us a call today at 727-259-2900 to see if it’s time to refinance.
When you start considering purchasing a new home, besides looking at houses and possibly condominiums, you'll also be running into mortgage terminology you may not be familiar with. Because of that, we've put together this list of the most common terms our borrowers ask us about. Knowing what these terms mean will make your mortgage loan process much smoother and easier to understand.
When you meet with your mortgage broker, one of the first things they will talk about is "Loan to Value" (sometimes called LTV). This is a ratio that shows how much loan you're taking out vs. the value of the home. Here's the equation: Loan divided by Value (Loan/Value).
Here's are a few examples:
You're purchasing your first home and have saved up $10,000 for a down payment. You find a home that costs $250,000. Your loan to value would be 96%.
Here's another example:
You just sold your condominium and have $80,000 for a down payment on your next house. You go shopping and find your dream home with a price tag of $400,000. Your loan to value would be 80%.
Each loan program has its own rules on what the LTV can be. FHA offers a loan that borrowers only need 3.5% down, so don't think you need thousands of dollars to get a home loan. The more money a borrower puts down, the less of a risk the lender has, which could reflect in a lower interest rate.
Pre-Qualification – before you start to shop for a home, you'll want to get a "pre-qualification" letter from your lender. To do this, your loan officer will need to take a full application, which includes asking about your income, assets, and debts. You'll also need to provide some documentation like:
The faster you get this data to them, the faster you'll get your pre-qual letter. Once you have that letter in hand, then it's time to go shopping with your realtor and find a house!
Each lender has an underwriting department with underwriters who review a borrower's application to see if they meet the specific guidelines of the mortgage they are applying for.
The main three things they look at are called the 3-Cs.
Here's how the loan process works:
More Paperwork
In most cases, the underwriter will ask for more information and additional documentation. Be ready and willing to provide this quickly. That will make your loan move much faster.
The pre-approval is different from the "pre-qualification" letter. A pre-approval is from the underwriter saying that your loan file looks good, and you are pre-approved.
Once in a while, a borrower will be "pre-approved," but then there's something wrong with the property that makes the lender not want to lend on it. For example, if the roof is in bad shape and needs to be replaced or if there's extensive dry rot. In those cases, the property isn't acceptable, but you, as the borrower is still pre-approved. If a problem like that comes up with a house, it just means you have to go shopping again.
Debt to Income sometimes called DTI. This ratio compares your monthly expenses (housing, credit cards, car payments) to your pre-tax income. The higher your income is and lower your debt, the better. Here's an example:
In the above case, your debt to income ratio is 25%, which is good.
This ratio is an important one and is one of the primary ways lenders and underwriters determine the amount of a home loan you can afford.
Generally, you want to keep this ratio at 43% or lower to be approved. When you understand this critical ratio, you'll know why it's smart to stay within your budget when shopping for a house. You don't want to be shopping for something more expensive than you can afford and be disappointed when you can't get a loan.
When you're ready to start shopping or just want to see what you could be qualified for - give Clearwater Mortgage a call at 727-259-2900.
Some of the most common questions our borrowers ask are around fees and loan estimates, so we thought we’d give you more data about the costs involved in a mortgage loan.
Once you’ve found a home and have a signed contract with the seller, let your mortgage lender know right away. They will give you a loan estimate within three days. This document lists all of the “estimated” costs of your loan. Here’s a sample of one.
What’s important to realize is that it’s just an estimate. At Clearwater Mortgage, we try and give the most accurate estimate we can, but there are many fees included that the mortgage broker doesn’t have any control over. We know what our costs will be, but for other vendor fees like title and homeowners insurance, we estimate as accurately as we can.
Here are some costs other than lender fees that are listed on the loan estimate which other companies and government agencies determine the amounts of:
Property taxes - (assessed by the County you’re in). Property taxes can vary from one home to the next – especially in Pinellas County or Pasco County. So, if you find a home you’re interested in, ask your realtor what the current taxes are. That will give you an idea of what you’ll have to pay.
Most buyers have an escrow account, especially if you’re not putting 20% down. With an escrow or impound account, your taxes and insurance are paid along with your mortgage each month. So, when you buy the house, you’ll need to pay for some months of taxes ahead of time to get your account set up. The number of months you pay will vary depending on what month of the year you’re purchasing your new home.
Title Fees – The owner’s title policy in Pinellas and Pasco Counties is usually paid by the seller. It just depends on what’s in your contract. And in most cases, the title company is chosen by the seller’s realtor. At Clearwater Mortgage, as soon as we get an executed contract, we call the title company and ask for their fees to put into the loan estimate.
Appraisal – this runs between $350 to $500 depending upon loan and property type. If you’re buying a rental, the cost can run around $800 because there is additional data needed on investment properties. For example, the appraiser may need to find out what rents go for in that neighborhood. The appraisal is paid for at the time of service, so make sure you have that money available even if it’s on a credit card.
Homeowners Insurance – even if you have an insurance agent you use all the time, it’s a good idea to shop for this to get your best rate. To get your escrow account established, you’ll need to pay for 12 months of insurance and an additional three months. Here’s more data about escrow accounts.
Flood Insurance – In all of Florida, especially beach areas like Clearwater, flood insurance can be costly. Check the flood zone. If it’s designated “AE,” that’s prone to flooding, and you’ll have to get flood insurance. You can check a specific address on FEMA’s website here.
Those are the fees the lender has control over.
The number to also watch out for is “Cash to Close.” It's on the bottom of the first page of the estimate. Depending upon how much money you want to put down and the sales price, your cash to close will vary. You’ll want to make sure you have enough money when it comes time to close your loan and get the keys to your new home.
At Clearwater Mortgage, our goal is to make the mortgage process easy to understand. Give us a call at 727-259-2900 or apply online today.
When you're in the market to buy a new home, you might also be shopping around for a mortgage lender and comparing programs, rates, and closing costs. The trick in comparing mortgages from different lenders is to make sure you are comparing apples to apples. Doing that is easier said than done. Hear me out.
A lender fee worksheet is a detailed list and breakdown of closing costs and expenses for a mortgage. It's a way to compare programs if you know what you're looking for.
Lender A gives you an estimate based upon a conversation on the phone with limited or no documentation regarding your finances.
It's not that this is bad. But, it's really just a ball estimate until your financials are in hand, and he can analyze them against various loan programs. Whatever information you told, the loan officer is what he is basing his loan estimate on.
For Example:
"Well, my credit score on Credit Karma is 740 (credit Karma is not accurate for mortgage lending)". or "My income is $7000 a month and my wife makes $1000".
"Well, my credit score on Credit Karma is 740 (credit Karma is not accurate for mortgage lending)". or
"My income is $7000 a month and my wife makes $1000".
It might be a bit different when we see your tax returns. And, possibly, we may need to structure the loan in a way that your wife's income won't count. For example, if her credit score turned out lower than we wanted.
We need very accurate data and a full application to get an exact estimate. Until then, we can give a "ballpark" estimate called a fee sheet.
Later, when you have the exact property picked out, and we have all of your documentation, we can give a very solid estimate. That is called a Loan Estimate. By law, only certain parts of this can change after we give it, and by only specific pre-ordained amounts and under only certain conditions.
Make sure you are not comparing a Fee Sheet to a Loan Estimate.
Since interest rates change daily, comparing two loan estimates against each other can be a bit deceiving, especially if the estimates aren't on the same day. It can also be tricky if you are not comparing identical programs.
Stay tuned for part two of "Comparing estimates from different lenders," where we will go over some more caveats to consider.
In the meantime, when you're ready to get pre-approved, give us a call at 727-259-2900.